LONDON (Reuters) - The third global food price spike in four years may have peaked after a summer of stunning increases on cereal markets, as a U.S. government report on Wednesday raised hopes that a full-blown food emergency could be averted.

Fears of unrest and hunger seen in the 2007/08 crisis emerged as the worst U.S. drought in over half a century and persistent dryness in other key grain producing countries sent corn and soybean prices to successive record highs.

But the U.S. Department of Agriculture on Wednesday cut its forecast for the country's corn crop by less than one percent, indicating the worst drought in U.S. Midwest in 56 years may have done less damage than anticipated.

"The situation seems pretty comfortable compared to what many people feared," said Abdolreza Abbassian, senior economist and grain analyst at the United Nations Food and Agriculture Organization (FAO).

The U.S. drought had also sent wheat prices up by more than 50 percent and prompted calls for an emergency meeting of Group of 20 nations and joint action to calm markets.

"The concern we heard about earlier on was related to a worsening of the situation and this report does not draw that conclusion," Abbassian said.

U.S. corn prices were trading around $7.68 a bushel on Wednesday, down nearly 10 percent from a record high of $8.49 a bushel set on August 10.

The most recent food price surge revived memories of the 2007/2008 crisis which the FAO estimated added 75 million to the number of chronically hungry people in the world. Other estimates put the increase at up to 160 million.

Robert Thompson, a food security expert at the Chicago Council on Global Affairs and professor emeritus at the University of Illinois at Urbana-Champaign, said grain prices probably climbed higher than they needed to, based on supply and demand.

"Probably we overshot a little bit on the scare a month or so ago but it sent a strong signal that we were going to have to ration a smaller crop," he said. "It definitely got everybody's attention and started changing intentions in the livestock and poultry sector. It was a shot heard around the world."

Rich Nelson, chief strategist for Allendale, said the corn market had probably peaked.

"Drought rallies are based on the question of identifying production. Once that question is answered, the rally is over," he said.

OUT OF THE WOODS?

Some analysts and traders were still wary of calling an end to the price rises, noting that the USDA may have been reluctant to cut their corn crop forecast too aggressively with the corn harvest only about 15 percent complete. Major revisions often come in the October report.

Analysts also said prices may need to remain high to reduce demand for corn with supplies still set to be extremely tight.

"It's not a bold report. In the USDA's view, the situation is not worse than last month. But we know that there is the potential for a downward revision," said Sebastien Techer, analyst with grains consultancy Agritel.

"So it's won't be the return to low prices because we will need to ration demand through high prices and maybe have even higher prices in order to ration demand further."

Claus Keller, grains specialist with German commodity analysts F.O. Licht, said prices may weaken short-term but could strengthen again soon with the supply outlook still tight.

"The U.S. corn crop remains the smallest since 2006, and at that time the world had a much different supply and demand balance with less consumption for ethanol."